A revaluation of fixed assets is a technique to accurately describe the true value of the capital goods a business owns.  This is distinguished from planned depreciation, where the recorded decline in value of an asset is tied to its age.  

The purpose of revaluation is to bring into the books the fair market value of fixed assets.  It is commonplace for accounting methods to use maximum depreciation allowed by law.  This in turn will reflect fixed asset values that may be far below fair market value.  (Note: There are many accounting specifics that must be considered when upward or downward asset value adjustments are made)

When seeking a small business loan, lenders are concerned with the fixed asset collateral available that they can hold.  When approaching a lender using fixed asset value calculations that are derived for accounting and tax purposes, the business may be losing a significant value in the overall asset figure.  Using a revaluation or business asset appraisal, the borrower is able to accurately reflect current fair market value, which in most circumstances is substantially higher.

The revaluation appraisal method employs technical experts to carry out a detailed examination of the assets with a view to determining their fair market value.  Just a few of the factors that are considered are the date of purchase, extent of past use, type of asset, future demand, and availability of repair parts.

Revaluation of assets is a great tool in gaining approval for small business financing.  It is also beneficial to learn the fair market value for a business asset that is to be sold, to conserve adequate funds for replacement of fixed assets at the end of their useful lives, and to negotiate fair price for assets when undergoing a merger or being acquired by another company.

 


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